Delhi Court orders tax review for solar projects

Its response came after a trade group challenged the tax formulation unveiled on 1 January.

The Delhi High Court has asked the Goods and Services Tax (GST) Council to review the tax structure for solar power projects, the Economic Times reports.

The decision came as a response to a writ filed by the Solar Power Development Association which challenged the tax formulation unveiled on 1 January for solar power generating systems.

“Between divergent authorities for advance rulings (AARs) and an ad hoc basis of fixing a presumptive valuation between goods and services, the solar sector has had a chaotic induction into GST…(but) holds out hope of a quick and definitive solution to this long-standing problem of the solar industry,” said Rohan Shah, the counsel who represented the solar industry.

Previously, divergent decisions from the Authority for Advanced Rulings (AAR) led to huge confusion in the industry over the applicable tax rate.

AAR had ruled both 5% and 18% levies, though the industry felt that the government intent was to tax solar power systems at a lower rate, the report noted. The industry is reportedly of the view that applying 18% tax would derail India’s plan to add 100GW of renewable power by 2022.

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The Court has given the government two months to revert and reschedule the next hearing in August.